BEHAVIORAL ECONOMICS AND SOCIAL MEDIA

The Canadian Government introduced a welfare scheme called the Canada Learn Bond. The scheme was largely for the poor of the country. They were entitled to some amount of money if they sent their children to school. Even though Economists felt that it was a remarkable deal, it turned out that the take up was only 16% for the first few years. So why was this the case? Turns out, the poor, who work against the clock every day to earn a few dollars, didn’t have the time to visit the bank and create the necessary account for receiving the petty cash. The ease of achieving a goal plays a major role in whether one even gives it a try.

In Economics, human beings are believed to make rational decisions by weighing the costs and benefits of the options available to them. But are we capable of making the right decisions all the time? Behavioral economics tries to integrate psychology and economics to understand how people's behavior affects their actions and why people make irrational decisions that go against the predictions of economic models.

Behavioral economics asks questions like: Why do people buy chocolates, instead of fruits, when they are trying to lose weight? Why are people okay with stealing a can of coke, but restrain from stealing the money that could buy that can of coke? Why are people willing to drive to the next store to save $10 of a $50 book, but wouldn’t do the same to save $30 of a $20,000 car?

The book Think, Fast and Slow explains to us how human beings are governed by two systems when they make decisions. Now, assume that there are two systems, A and B. System A is the rational part of your brain, while system B is the irrational part. System A takes slow and analytic decisions by weighing both the pros and cons of the decision. System B on the other hand, is intuitive. It helps one take quick decisions, such as, whether you should grab a candy at the counter or not. We often tend to make irrational decisions because our efficiency to think rationally depletes once we put our mind to work. We get too tired and lazy to make rational decisions. In this stage, System A relies on System B to find a short cut to take the decision. System B does so by searching through your memory for a similar situation in the past to find out how you reacted to it.

Social Media is a tool that helps not only us but also businesses get connected to the entire world. The concept of behavioral economics is not new, but businesses have started reaping it's benefits only since the recent times. They aim to understand their customer's behavior socially.

When it comes to Social Media, a vast majority of people have similar behavior. Some of them are:

• We are influenced by the way questions are framed. Notice how people often get incentivized to buying fat loss pills that are advertised on social media as having 20% chance of working rather than a pill having 80% chance of not working? That is because people are constantly trying to avoid a loss.

• Social Media is both the cause and the cure for the fear of missing out. A core belief of behavioral economics is that people are influenced by what everyone around them is doing. Posts that have many views continue to get even more. This is because people are compelled, by their fear of missing out on the latest news and trends, to watch it.

• People's innate need to do the right things is deeply influenced by their peer's opinions about that subject, which is why they think twice before putting anything up on Social Media. Many people around the world die due to a shortage of transplantable organs, the reason being, even if people know organ donation is the right thing to do, they refrain from talking about it because it isn’t a very pleasant thing to talk about. This is why Facebook, in 2012, agreed to allow its users to specify their status as an organ donor. Links were also provided for those who wanted more information about the donation or the registration process. This resulted in more people talking about organ donation and the organ crisis which in turn decreased the spread of misinformation. This influenced people to be more comfortable in taking a step towards organ donation.

The internet economy is growing faster than ever and social media is just fastening this process. Social behavior is what drives companies to success and without understanding it, it can bury them deep down into the ground.